Many large corporates will raise equity to fund growth: Ajay Saraf, ED and head of investment Banking, ICICI Securities

By: |
Published: September 20, 2019 3:09:33 AM

On the other hand, we have a strong broking franchise which gives any entity who is looking at raising public capital an unparalled access to 4.5 million retail and wealth investors. A combination of the two gives us an edge.

large corporate, equity fund, equity fund growth: Ajay Saraf, ED, investment Banking, ICICI Securities, ICICI bank, HDFC AMCAjay Saraf, ED and head of investment Banking, ICICI Securities

At a time when the market is in a bearish mood, ICICI Securities has dominated the primary market in the first half of the year. The total value of deals ICICI Securities completed in the last five months is more than Rs 38,000 crore. Ajay Saraf, executive director and head of investment banking at ICICI Securities, talks to FE about the pipeline and why will large corporates hit the capital markets. Edited Excerpts:

How has ICICI Securities managed to pull off so many IPOs despite the poor market sentiment?
ICICI Securities has constantly been focusing on sunrise sectors, companies with new-age technologies, strong financials and strong corporate governance. In the IPOs completed this year, we were able to leverage our strong institutional equities network, supported by a competent research team which covers large long-only investors across North America, Asia and Europe, apart from India. Our offerings were well received by investors with IndiaMart trading 50% above its issue price in two months from listing and becoming the most successful IPO in this calendar year. Even in FY2019, two of our managed IPOs – Aavas and HDFC AMC – were the best performing IPOs of the year.

On the other hand, we have a strong broking franchise which gives any entity who is looking at raising public capital an unparalled access to 4.5 million retail and wealth investors. A combination of the two gives us an edge.

Given that most corporates are cash strapped, do you expect more promoters diluting equity to raise capital?
Many groups have not raised equity for long. Hence, their debt to equity looks large. Many large corporates are under capitalised and will require raising equity in the near to midterm term to fund growth. With bank credit also becoming difficult to raise due multiple reasons, many promoters are now becoming more open to diluting stake to raise capital and are more flexible over pricing, unlike in the past. We expect many to hit the public or private market to raise equity capital.

What is the market looking like for follow-on offers by promoters looking to raise equity capital, given that many large companies too are in need of capital?
Companies with strong fundamentals will always attract traction form investors. This year, we saw robust demand from high quality investors (both FII and DII) for OFS by promoters in companies like LTTS, SBI Life and HDFC Life.

How much money has been raised in the primary market so far this year?
After a subdued first half in the last fiscal, H1 of FY20 started on a positive note with two IPOs opening in April. After the strong renewed mandate to the government, four IPOs were successfully completed and total funds raised through these six IPOs was Rs 7,530 crore (Rs 400 crore and above IPO considered). Another encouraging fact to notice was that we had IPOs from different sectors like tech, MFI, consumer, solar EPC and healthcare hitting the Street.

Of the total money raised in the primary market, how much has been raised by ICICI Securities?
The total value of these deals completed by ICICI Securities in the last five months is more than Rs 38,000 crore. ICICI securities has raised Rs 4,990 crore though four equity offerings in FY20 — IndiaMart Intermesh, Affle India, Spandana Spoorthy Financial and Sterling and Wilson Solar, which constitute 67% of the total funds raised through IPO in FY20. Apart from IPOs, I-Sec also was involved in other multiple deals like Bharti Airtel rights issue (Rs 25,000 crore) Piramal sell-down in Shriram Transport Finance (Rs 2,260 crore), Warburg Pincus sell-down in ICICI Lombard in two tranches (Rs 2,953 crore), Advent takeover of DFM Foods (Rs 852 crore), Oriental Infratrust InvIT (`2,306 crore) and OFS of L&T Technology Services (Rs 666 crore).

How much do you think will companies raise through the primary markets in FY20?
With several reforms being undertaken by the government, we expect the markets to improve going forward and hope to have a strong line-up of IPOs in H2.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.